The best things in life are free

As we begin a new decade with the debris of a once-revered
financial system at our feet, we have t

How did things get back to the very odd kind of normal that is the British economy? Steelworkers in Redcar start the year looking for work and public services face deep cuts, while thousands of bankers in the City of London, many kept in business by the taxpayers' bailout of their banks, prepare to spend bonuses in excess of £1m as another mini-bubble builds, fuelled by low interest rates and the rush into Chinese stocks and shares.

This is what happened in 2009: a small group in society takes a huge gamble with the entire economy to earn large bonuses for itself, inflicts lasting damage on everyone else, expects the public to pick up the bill and then carries on as if nothing much happened, while displaying an extraordinary sense of entitlement and arrogant disregard for the rest of society. Worse was allowed to pass with barely a whimper of challenge, until the plan by the Chancellor, Alistair Darling, for a windfall tax on bankers' bonuses. The job raising more fundamental questions about whether we need such a complex, self-interested and dangerous financial system has been left to religious leaders, socially aware financial regulators and journalists.

If 2009 was spent rescuing the financial system, the year ahead should be spent remaking it, and to do that we need to fashion a fundamentally different relationship with money.

The main lesson of the crisis this past year is that money has become a capricious and overbearing ruler of our lives - by turns threatening to discipline us, only to offer us liberation, on its own terms. Instead of hoping for a return to easy credit and rising property prices, we should put money in its proper place by reducing its footprint in society, limiting its reach, promoting alternative ways to account for what we value and finding less socially destructive ways to save and invest, lend and borrow. We need to see money less as a mystical religion or a drug and more as a tool.

In the 1950s, dull, respectable Britain was not obsessed with money. There were limited opportunities to make money and fewer to spend it in a time before shopping malls. Modesty and thrift, repair and reuse, were the watchwords of the day. It was in the late 1970s that politics started to revolve around how money could bring dynamism and disorder to society.

Thatcherism started life as monetarism, a critique of how Keynesianism had allowed government to become financially incontinent. Thatcher's original crusade was to restore respect for the value of money through strict control of the money supply. This discipline did not last for long, however. From the mid-1980s, with monetarism cast aside, Thatcherism's mission was to let money loose. Money was no longer a source of discipline, but an elixir, a source of liberation, freeing people to make their choices in the commercial democracy of the open market. Easier credit allowed a culture of debt and desire to overtake deferred gratification and modest self-sufficiency.

The City embodied Thatcherism's monetary schizophrenia. One the one hand global financial markets were meant to be unforgiving: companies had to deliver returns to shareholders who could shift their funds wherever they liked at the flick of a switch.

Yet, just as the capital markets were making our livelihoods more insecure, they offered their own escape plan. The City began to multiply and regenerate money in startling ways. On taking out a mortgage, people were ushered in to a casino in which ever more complex gambling games were being created the whole time. With one hand, money disciplined us, keeping wages in check. With the other, it set us free, with seemingly limitless credit bridging the gap between what we wanted and what we could afford. If we really want a more stable future we need to put this abusive and dependent relationship with money behind us. That demands going back to understand what we really value and what money is for.

What we most value - love, dignity, good conduct, pride, trust, friendship, care - does not come from money. If we were to try to use money to buy any of these things most people would think we were mad. Imagine for example asking, "How much do I owe you for that?" after your first kiss with a lover. Those aspects of our lives that we really value are things that cannot be priced and could not be sold: what makes them so valuable is precisely that they are beyond price. You cannot change a nappy with a credit default obligation derivative. Poets do not write for stock options. Good relationships do not need insurance policies. Few people would care more for another person if there were a bonus attached.

Not surprisingly, most utopias - starting with Thomas More's - planned to do without money. Yet societies that do without money entirely invariably end up failing. Cities have done without money, but usually only under siege, when gold, ammunition and, most of all, food becomes the currency. Pol Pot's Cambodia did without money. Closer to home, experiments such as time banks, which seek to use time as a currency, and local economic trading schemes are more talked about than used.

The trouble is that what we value in itself and what we put a price on are often inextricably linked. My wife and I fell in love over a series of lunches in London restaurants - yet you will not find "Falling in love" listed on the bill, just after the fizzy water. The paid-for meals were a vehicle for the expression of love which is beyond price. The value something has in itself is often "hidden" behind the entrance ticket we buy to make it possible. The cover price of a great book never captures its value.

When the money side of this relationship becomes too strong - as it has done in the past two decades in Britain - life becomes unbalanced. We focus too much on the surface value, price, and not enough on the hidden value, which lies behind it. To live flourishing lives we need something to lie behind the surface world of buy and sell. As the Canadian philosopher Charles Taylor puts it in A Secular Age, his history of how religious belief adapts to the society around it:

The individual pursuit of happiness as defined by consumer culture still absorbs much of our time and energy, or else the threat of being shut out of this pursuit through poverty, unemployment, incapacity galvanises our efforts . . . and yet the sense that there is something more presses in. Great numbers of people feel it: in moments of reflection about their life; in moments of relaxation in nature; in moments of bereavement and loss; and quite wildly and unpredictably.

The something "more" that Taylor is talking about tends to be those experiences that give us a different perspective on life. They have a lasting impact if only because they are memorable experiences, which move, touch and so stay with us. They make us feel authentic, as if we have found ourselves - for example, through travel - rather than having ourselves defined by humdrum work. They invariably involve relationships, bringing people together: friends, families, lovers, fans and believers.

The objects in our lives that we really value - the stuff we cannot bear to throw away - mark out relationships that we value - a memento from holiday, a photograph from a wedding, a collection built up with a partner, toys kept from childhood. That is one reason we are so fascinated and consumed by homes, because they sustain relationships. It is also why we pay to be part of huge social gatherings - festivals, carnivals, raves, sporting events: mass shows of emotion that give us a sense of being caught up in something more than ourselves.

When money serves a "something more", then consumption has a point. When the link is broken, modern, money-driven society loses its anchor. The challenge for politics ought to be to turn that insight into policy and politics by putting money in a more subordinate position in society.

A cornerstone of this would be to recognise the already vast non-monetary economy on which most of life depends. Most of the work of caring for children and elderly parents is done for free, mainly by women. A society that wants to age well should promote the non-monetary values of volunteering and relationships. Consumerism is not a good training for later life. Helping people to participate and contribute, to remain active and independent for as long as possible, is.

The young are also fostering non-monetary economies through the web's growing culture of mass barter and sharing. The CouchSurfing community, in which browsers, most of them young, arrange to sleep for free on one another's sofas when visiting a city, has more than a million members. Car pools and lift-sharing schemes organised on the web, such as Zipcar and GoLoco, are thriving across the world. Freecycling, in which people give away things they don't want to others who need them, has hundreds of thousands of participants globally.

The largest and most impressive examples of the non-monetary economy are open-source software programs such as Linux and free shared resources such as Wikipedia, mostly created with no money changing hands, the effort of the contributors co-ordinated without the benefit of prices or bonuses. In the future, more people will get stuff done without money changing hands through the web.

Another step would be to ignore the advice of most economists and follow the lead of Dustin Hoffman by putting money in different pots for different purposes. At the start of his career Hoffman had a pot for rent money and a pot for food money. He would not touch the rent money even when he ran out of food money. Economists tell us that this is stupid and irrational: there are no separate monies, just separate calls on money at different times.

And yet, as the US sociologist Viviana Zeli­zer points out in her book The Social Meaning of Money, most people make a distinction between money to save and to spend; what to put to one side for a rainy day or to splash tomorrow. As a society, this would entail separating the business of making loans to households and businesses from the casino business in which hedge funds make big bets on the future. Mervyn King, the governor of the Bank of England, is the most high-profile advocate of such a separation.

We should also encourage financial innovation that works in society's interests rather than serving the self-interest of bankers. The 1990s were not just the era of ultra-complex debt products. At the other end of the social spectrum, the Grameen Bank found ways to get millions of small loans to poor farmers and villagers to allow them to do the most basic things - such as put tin roofs over their huts. Kiva, an exchange that allows people in the developed world to invest directly in enterprises in the developing world, handled loans of $3.8m in just one month four years after being established.

Zopa, the online peer-to-peer banking exchange that directly matches lenders with borrowers, is lending more than £2.5m ($4) a month. In Africa new microbanking systems are emerging, such as M-Pesa in Kenya, which uses mobile phones as its infrastructure and phone credits as its currency. M-Pesa launched in March 2007 and now has more than six million members in Kenya. We need more financial innovations such as Zopa, M-Pesa and Grameen, which are simple and clearly socially useful.

That should be combined with more open, social regulation of the money machine. Science is increasingly opening itself up to public scrutiny as it develops complex new fields such as nanotechnology. It is time we had a similarly open approach in finance, so that innovations could be scrutinised by ordinary lenders and borrowers before they are approved.

Reforms of this kind, combined with tighter regulation, more socially responsible bonus systems and taxation regimes designed to promote greater stability, such as the Tobin tax, might give us a money machine that serves society, rather than what we have: a dysfunctional system, hosted by a society that seems to have little control over its behaviour.

Money does not make the world go round - not all the time, and never on its own. Money really brings meaning to our lives only when it helps us in our search for something more. If, as a society, we do not start that search for something more, money will rise to rule us again, to our ruin.

Charles Leadbeater's books include "We-Think: the Power of Mass Creativity" (Profile, £8.99)